Essentials of Corporate Arbitrage for the Financial Manager

9 Pages Posted: 24 Nov 2015

See all articles by James S. Ang

James S. Ang

Florida State University; Florida State University - College of Law

David Weaver

Florida State University, Department of Finance, Students

Date Written: November 19, 2015

Abstract

This article is a primer on how profits are created in corporate finance and thus provides a justification for the role of corporate finance in practice. The key is to understand the role of corporate arbitrage. Corporations have a larger arbitrage opportunity set which allows the firm to arbitrage assets that individuals cannot. Furthermore, they can also create their own short position, which is a major constraint for individual and large investors. Thus, the firm serves a crucial role as an arbitrageur that is often overlooked by financial managers. Practicing managers and students alike should thus realize this role and utilize appropriate strategies to discover and exploit arbitrage opportunities to benefit not only their firm but the capital markets as a whole.

Suggested Citation

Ang, James S. and Weaver, David, Essentials of Corporate Arbitrage for the Financial Manager (November 19, 2015). Journal of Applied Finance (Formerly Financial Practice and Education), Vol. 20, No. 2, 2010, Available at SSRN: https://ssrn.com/abstract=2693065

James S. Ang (Contact Author)

Florida State University ( email )

College of Business
Tallahassee, FL 32306-1042
United States
904-644-8208 (Phone)

Florida State University - College of Law ( email )

425 W. Jefferson Street
Tallahassee, FL 32306
United States

David Weaver

Florida State University, Department of Finance, Students ( email )

Tallahassee, FL
United States

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